What are account aggregators, why do you need them, how do they work

The Account Aggregators framework gives you complete control over your financial data. You decide which entities can access your data, for how long, and for what purpose

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Managing finances when people have multiple accounts, loans and payment apps can seem complex. Account aggregators (AA) make financial management easy by using tools that consolidate financial data from multiple sources into a single, user-friendly platform.

What is an Account Aggregator?

AAs are a category of central bank-regulated NBFCs and act as a secure bridge between financial information providers (FIPs) and financial information users (FIUs). They are meant to facilitate seamless and consent-based sharing of financial data between the two entities.

 

“Account aggregator plays a critical role in enhancing financial decision-making by providing a comprehensive overview of an individual’s financial health. For lenders, AA improves credit risk assessment, ensuring that loan approvals are based on accurate and holistic financial data,” said Rishabh Goel, co-founder & chief executive officer (CEO) of Credgenics.

 

Number of AAs

As many as 15 AAs have operational licences and three in-principle AAs await an operational approval.
 

How do AAs work

The AA framework operates on a simple principle:

 

User registration: An individual or business signs up with an AA.

Consent management: When a FIU requires access to the user's data, they send a request through the AA.

User authorisation: The AA presents this request to the user, who can then grant or deny consent for specific data to be shared.

Data retrieval: If consent is granted, the AA fetches the required information from the relevant FIPs.

Data transmission: The AA securely transmits the data to the FIU without storing it.

Banks require account statements to process loans and underwrite borrowers. However, all bank statements are different and processing them is complicated. “An AA solves this by offering a uniform data structure across all banks and accounts, and since the information comes directly from the banks, the risk of it being erroneous also goes away,” said Rajat Deshpande, CEO & Co-Founder of FinBox.

How account aggregators help people

With an AA, you can easily access all your financial information across multiple institutions in one place. This can include bank accounts, insurance policies and investments. You no longer need to log in to multiple platforms or visit various institutions to get your financial data.

 

The AA framework gives you complete control over your financial data. You decide which entities can access your data, for how long, and for what purpose. This transparency and control align with the principles of the Digital Personal Data Protection (DPDP) Act 2023, ensuring your data is shared only with explicit and informed consent.

 

By allowing you to share your financial data securely and easily with service providers (FIUs), AAs can help you access a wide range of financial services more efficiently. For example, when applying for a loan, the lender (FIU) can quickly access your financial history from various sources (FIPs) through an AA, potentially speeding up the approval process.

 

AAs are regulated by the Reserve Bank of India (RBI) and must follow strict guidelines to protect your data. Although they enable an encrypted data flow, AAs are data-blind consent managers. The ecosystem is designed to ensure that your data is shared in a secure, encrypted manner, minimising the risk of data breaches or misuse.

 

B G Mahesh, CEO of Sahamati, explained the care one should take when sharing AA consent with a service provider.

 

“When sharing your AA consent with any financial service provider, it’s crucial to carefully review the terms of data usage presented in the consent template. Pay close attention to details such as the purpose of data collection, the specific financial information types being requested, the data range, whether the data will be fetched on a one-time or recurring basis and how long the service provider can use the data ( data life),” he said.